Like I said, stocks are V-shaped recoveries, so I think I’m going to sound a little bit like I’m talking about both sides of my mouth because I told you if you have an immediate need, meaning you have kids that are school age, you’re going to be in the property for probably seven plus years, you sometimes have to hold your nose and just make the decision because you have an urgent need.
However, in this real estate market, where if you don’t have that urgent need, there is likely going to be a benefit to waiting to see where the data goes because there’s usually an opportunity. This is not like if you missed the opportunity this week, it’s gone next week. Typically, real estate is a much slower-moving process, and you can kind of see how the numbers develop a little bit more.
In terms of answering the question, “should I buy in 2023,” the first thing you need to do is assess your need. Do you need a home, and then you need to assess the urgency of your need. Do I need a home right now before the next school year, before the job starts, or do I have some time to see this out to see if prices come down, to see if interest rates might subside?
Another reason why you would consider buying real estate or buying a home in 2023 is that saving for a down payment right now is actually easier than it has been for the past couple of years. We’ve had people saying, “I want to save for a house. I want to build up cash.” But cash is doing nothing. Cash is doing nothing. Can I invest that? Can I do T-bills? Can I fill in the blank with the thing they want to do? And it’s been hard for people to build up that stable base to build a down payment fund. That’s gotten a little bit easier here recently.
It is interesting if we pull up the slot of what the FED funds rate is done. I mean, this is a double-edged sword. It’s a blessing and a curse. It is nice that your cash is now getting over from north of four percent getting closer to five percent, which now feels like, “Hey man, I’m actually making some money every month.” It’s encouraging when I see I have interest. But you also have to recognize when you look at this fed funds rate chart that we have where you see the affordability of housing is directly correlated. That interest rates now being over seven percent on mortgages is in direct relationship to the Federal Reserve raising rates. So this is a gift, but it’s also a curse, and that’s something that I think you have to work through.
But it does give you, while you’re in that phase where you have flexibility, at least while you’re trying to build up the down payment on the house, you’re actually going to make a little bit of money. Because I don’t think the inflationary pressure because we all always hear, “Hey, inflation was eight percent over the last year, your cash is only making now four to four and a half percent, so you’re still losing purchasing power.” Not necessarily with real estate because if housing prices are settling down a little bit while there’s this tug between people selling not realizing there’s not as many buyers, you might actually be able to build in the background not be losing that purchasing power because it’s the real estate that’s actually adjusting. That’s a win.
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